Porter Analysis China

Topics: Fast food, Pizza Hut, Hamburger Pages: 2 (664 words) Published: July 17, 2008
Unlike what one would expect, KFC has little rivalry with similar fast-food chains in China. The primary reason is that their core products are different, as in they sell different kinds of fast-foods with very different tastes and styles. For example, if KFC raised its price for chicken by a small amount, Chinese chicken lovers who may not be as accepting to pizzas (many Chinese people strongly dislike the taste of cheese) are not going to switch to Pizza Hut just because the price for KFC increased. In addition to that, these restaurants have such different target customers that the fluctuation of price for one restaurant is not going to affect the others. For example, a full meal at KFC range about ¥15, whereas a full meal at Pizza Hut can cost over ¥50. The drastic difference in price assures no price competition between these restaurants

Buyer/Supplier Bargaining Power
The customers of KFC, especially as individual buyers, have almost no bargaining power because if only one customer threatens to no longer eat at KFC, the store is not going to lower its price because the cost of losing one customer is not very great. The suppliers, like the buyers, have very little bargaining power. In terms of food, KFC, upon its move into China, urged many of its U.S. suppliers to also extend branches into China. KFC also began helping local suppliers by giving them technological support to improve their products. This is a brilliant strategy because the supplies that KFC would otherwise need to import from the U.S. can now be obtained domestically, and if the U.S. suppliers decide to raise their prices, KFC can easily switch to the local suppliers. With this strategy, KFC created competition among its suppliers, lowering the supplier bargaining power.8 In terms of human resources, labor cost is extremely low because the supply of non-skilled workers great exceeds the demand for them. With so little buyer and supplier bargaining powers, KFC is able to have a very...
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